Schools will be forced to tighten their belts in the coming months as the credit crunch continues, a cross-party group of MPs has warned.

The schools select committee said plans must be made now to allow education and children's services to cope with a more "austere" future.

In its annual report on the expenditure of the Department for Children, Schools and Families (DCSF), the committee predicted there would be less investment in these services in the future.

The report said the concern was that "these serious economic problems could undermine investment in education and related services and could prevent the Government from achieving its objectives".

It said that the Government could begin to see private companies less willing to enter into private finance initiatives (PFIs), particularly in connection with the Building Schools for the Future (BSF) programme, which aims to renew all secondary schools in England.

Under PFI, private companies fund the building of schools, with typically the local authority repaying the costs over the next 25 to 30 years.

Committee chairman Barry Sheerman said: "There is a chill wind blowing for everyone, and with PFI in particular, because they are very long term financial commitments to make."

The committee said it was pleased the Government had reaffirmed its commitment to capital investment in education, but it added there were concerns that a review of BSF in the future could lead to it being curtailed. And it called for the DCSF to make a "clear statement" about the future of the BSF programme.

Mr Sheerman, Labour MP for Huddersfield, said the effects of the economic downturn were already being felt in other areas. He said: "One thing we clearly picked up, when you look at spending, already the expenditure on early years is lessening."

She said: "This is not a scaling back of BSF, it is common sense and absolutely right to make sure that the taxpayer gets the best from every penny of capital investment. BSF has support at the highest level - the Prime Minister recently emphasised school investment as a counter-recessionary pressure."

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